The Dividend Cafe - Wednesday - April 30, 2025

Episode Date: April 30, 2025

April Market Insights: GDP Fears and Volatility In this episode of Dividend Cafe, Brian Szytel discusses the significant market volatility experienced on April 30th. The DOW initially dropped 700 points before closing up by 141 points, while the S&P saw minor gains. Key topics include the unexpectedly small GDP contraction, weak private payrolls, stable inflation rates, and a rise in consumer spending. Brian addresses concerns about potential recession risks and emphasizes the importance of focusing on fundamental investments and long-term strategies amidst market fluctuations. 00:00 Introduction and Market Overview 00:39 GDP and Economic Indicators 01:42 Employment and Inflation Insights 02:18 Consumer Spending and Credit Health 03:00 Market Volatility and Predictions 03:47 Recession Possibilities and Personal Observations 05:11 Investment Strategies and Market Behavior 06:14 Conclusion and Looking Ahead Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome to Dividend Cafe. This is Wednesday, April the 30th. Brian Seitel is with you here today on quite an interesting, as I'll call it, trading day today. The Dow this morning was actually down 700 points and ended up regaining some of that through mid-morning and then built on gains and then

actually got in a positive territory, believe it or not, before the close. So we closed up 141 points on the Dow. The S&P was up just slightly about eight points, but that puts the S&P higher now seven days in a row. And for any of those trying to predict how this last week would have gone in markets, I think most would have predicted incorrectly because it's just been counterintuitive given everything that has transpired here today. The big news on the day was about GDP and there was fear in markets that it was going to really fall off a cliff. Some of the early trackers, for example, the Atlanta Fed

GDP, which is a heavily watched gauge of trying to predict wherever GDP is going to come in, had a negative 2.7% GDP number for the quarter. A lot of that was around imports and particularly gold. And so they changed their model to try to make it more accurate. But even firms like JP Morgan and Goldman had pretty dire predictions for the quarter. So everyone knew it was going to be bad. And the reason is that trade is part of that calculation. And so if you get a big surge of orders that are trying to be in advance of tariffs, that's going to cause a lot of fluctuation.

And so getting a negative number of 0.3 today versus potentially a positive 0.3, at least that's what the consensus was, is actually not all that bad and I think markets found some footing based on that. But you also had ADP private payrolls that were weaker than expected. We were thinking 120, we got 62, so call it half on private payroll numbers. So a little softening on the employment front. But then you also had for another mixed bag, you had inflation, which is the PCE number come in unchanged at 0.0%.

It was only expected to be slightly positive, but still, put the year over year on headline at 2.3, which is fastly moving towards their 2% target on inflation. So there you have it, mixed bag on the economic front, pretty much across the board. There was a consumer spending number, even to give you another figure, that I'll move the needle the other way. Consumer spending was actually better than expected. 0.7%. So regardless of how bad sentiment is, which is people are feeling bad about the future and the outlook and such, they're still spending money.

And it's because they still have jobs. And so they still have the ability to. Credit has deteriorated a small amount, but not anything that is worth ringing an alarm bell over. So fundamentally, credit spreads, delinquency rates, credit card delinquency rates, mortgage delinquency rates, they've moved a little higher, but just not enough to really paint a real dire picture on the consumer front. So there you have it. The volatility is going to be here with us. The daily swing was 850 points today around all of this stuff. So onward we go. Question in there was about, is this the calm before the storm? Essentially, markets have recovered here the last week.

Is that just some window dressing that looks nice before things get really a lot worse? And of course my answer is that's always the question, but that's the evergreen question that is in front of every single downturn that ever existed, which is that was the worst behind us or is there more to come? That's the back and forth that people get stuck trying to predict. And the problem with it is it can cause behavior to be poor, trying to move in and out of things or be fearful and sell and then realize that was the opposite of what should have been done. Hence the way this week has turned out.

But will we get a recession out of this? Look, I'd put it a little over 50% chance. That's not some bold prediction. First quarter likely to remain slightly negative. That leaves second quarter to potentially be a negative number. That's not what consensus is telling us on GDP. We were expecting something positive, but there's trade uncertainty. And so we don't exactly know.

I can tell you from personal experience and flying home last night through LAX that there was nobody in the airport. It reminded me of March and April of 2020 when I was still traveling across the country for work and the airports were empty. It was really an eerie feeling. That's just an anecdotal comment. Los Angeles happens to be a very big import harbor and so we'll see how some of these numbers flow through the economy. Could also just be the lull after spring break and before Memorial Day. So who knows? I can tell you the TSA travel numbers and I looked into it actually aren't lower across the country.

But there is less tourism. We saw it in some of the employment figures on hospitality numbers coming lower and things like that. And if you bake all of that together through a very large and diverse consumption based economy, do I think we can get two quarters in a row of negative GDP in a recession? Sure. I think it's possible. Do I think that's something to be overly fearful of if that's all we get, which

is a shallow recession out of this? I don't because I think markets will price it in pretty soon. Stocks will bottom before that actually occurs. And that may have already happened with our 20% pullback, but either way, it's focusing on the fundamentals that you can control. It's the inputs over outcomes. It's quality investments, high free cashflow, defensive business models, high dividend payments that are growing.

And you're able to reinvest that and tough markets and buy shares at lower prices. Those are the things that you should be focused on. The day-to-day news when you have 900 point swings, let it happen. Let it play out. Let it unfold. It's play out. Let it unfold. It's markets trying to price everything in. That's my answer for better or worse. But there you have it on the day for how volatile it was.

I don't believe it was frankly, all that actionable. We definitely looked at adding to some positions on the weakness this morning and didn't find enough reason to do so. So it's not set on hands. We're making moves every day and we're looking at all of this very actively and talking it through. And of course we do have worldviews and macro views

and all these important things. But on a business by business basis, we feel very good about where we're positioned and I don't think that needs to change in the short term. So I hope that's helpful for you today. Tomorrow will be Thursday. There'll be some more data to go through and should be another market moving day. So I look forward to that. Reach out with these good questions. I appreciate them and have a good evening.

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